Just imagine what the margin on Beats products must be. Short of Apple getting into the wine distribution business, I doubt there's anything they do with higher margins than a $299 pair of Beats cans (or those $250 Powerbeats Pros: Essentially the same thing as a set of the already expensive Airpods, with a little more plastic, for $100 more. Genius).

Kinda curious how much the retailers pay for Beats stuff, cause historically it seems like they go on some pretty big sales regularly.

Tangentially I just remembered the Pill, wonder if/when they’ll update that thing.

While I’d love to have a combo eInk/MicroLED screen, I’m not convinced that screen technology is meaningfully holding back the Apple Watch. I think new health sensors and improvements to existing sensors are more likely to compel new users.

I know a fair number of people who don't have one because it isn't always on or who gave up on it for the same reason. While the raise to activate works sometimes, it surprisingly depends a lot on the shape of your arm and so forth. Even I find myself hitting the side button more than I'd care to.

Volumes on AirPods must be several times that of the Watch, just on price difference alone.

Series 3 watches are routinely sold for $199. Airpod with wireless charge case is $199, while regular case is $159. I dont think price is the determining factor on volumes for the two different devices, just user needs and wants.

Series 3 watches are routinely sold for $199. Airpod with wireless charge case is $199, while regular case is $159. I dont think price is the determining factor on volumes for the two different devices, just user needs and wants.

Would love to know how Apple accounts for all this (in the monetary sense). Obviously they're selling to Target, Walmart and so forth at a much lower price than list. Most of these sales appear to be being done by the reseller and not Apple. Yet when Apple accounts for sales through their own online or retail do they count the wholesale or retail price for product revenue?

I ask, because I'd assume that sales actually don't affect how revenue is counted by Apple at all. That is when Target puts an iPad on sale it's Target losing the margin not Apple.

I raise this just because I'd guess that all that matters for those revenue charts are the wholesale prices - and I don't think we even know what those are.

I don't know the veracity of this, so take it for what it is, but a little bird told me at one point that the discounts you see used to be all on the shoulders of the retailer—meaning, if Target wanted to sell an iPad for $100 off, it was Target losing $100 on margin, not Apple. But that more recently, as Apple has been forced to compete more on price, that they are often rebating all or a portion of those discounts direct to the retailer, thus shouldering those costs themselves.

Amazon, and their far deeper discounts, may be a different story—that's more likely Amazon doing their ruthless, actuarial-driven distribution of margin and profit across tens of millions of transactions. Which may also be why it took Apple so long to give Amazon the blessed "authorized retailer" status since Amazon does what Amazon does and no brand is going to tell them how to sell/discount products. But it likely got to the point, as with all things, that you ignore Amazon as a marketplace at your own peril.

I ask, because I'd assume that sales actually don't affect how revenue is counted by Apple at all. That is when Target puts an iPad on sale it's Target losing the margin not Apple.

Nope. it's Apple. As an authorized reseller, Target isn't allowed to change the price unless the product is discontinued or used. That's pretty standard fare for authorized resellers and MAPs. Apple makes up the loss by selling in bulk across multiple products (i.e. Target wants a 20% off sale for the AW3, Apple agrees and says they can do that for 1k of them but in doing so, Target has to agree to purchase 2k more of something else (say ipads). This is why sale items often "run out of stock" and are magically replenished after the sale.

All of this talk of Apple sales tactics is reminding me of Honda in the 1980s and 1990s (hopefully minus the endemic corruption).

In the late 1980s, Honda was so far ahead of every other car maker that they could almost literally set their own prices. Zero discounts, usually dealer surcharges, waiting lists, a buyer for every car they could possibly assemble, zero sales effort needed. But then the rest of the industry slowly caught up. By 2000 Honda had to sell cars just like everyone else, including the occasional rebate, discounted loan, or subsidized lease when something got overproduced or proved unpopular. If a product manufacturer finds a magic formula, like Honda circa 1986 or Apple circa 2013, the rest of the market won't rest until they figure it out and catch up.

So the China tariff thing is interesting for Apple. Thus far Apple has avoided tariffs on their products, but Trump said that will end and high tech will hit 25% in penalties. Apple has announced that if things reach 25% then they will have to switch to another country, possibly India.

China can't lose any business to India, so they will either make the trade deal with the US, swallow the costs of the tariffs themselves, or play hardball with Apple and threaten sales in China if they try to leave.

So the China tariff thing is interesting for Apple. Thus far Apple has avoided tariffs on their products, but Trump said that will end and high tech will hit 25% in penalties. Apple has announced that if things reach 25% then they will have to switch to another country, possibly India.

China can't lose any business to India, so they will either make the trade deal with the US, swallow the costs of the tariffs themselves, or play hardball with Apple and threaten sales in China if they try to leave.

Hopefully a trade deal will be reached sometime soon.

Isn't Apple already prepared for that sort of thing? Many of its devices are already made outside of China. FoxConn has factories now in many other countries including places like Brazil. I know that late last year Foxconn was already hedging its bets by planning on opening factories in Viet Nam for iPhones in case of problems. They already have factories in India as well and could presumably shift production there without much trouble.

Where do you get this impression? Apple has talked a lot about wanting to manufacture elsewhere, particularly India (as a way to grease the wheels of getting a better presence inside of that market) and perhaps manufacturers certain components outside of China, but final assembly of everything they make is almost 100% China. Apple is in a particularly difficult spot if this tariff nonsense comes to their front door.

Which is not to say that isn't "solvable," but there's a pretty massive logistics issue of how all the raw materials and bits and pieces make their way to a different country for final assembly as well. Tariff wars turn on a dime, and manufacturing logistics take months if not longer to sort out, so it's not like Apple can turn on a dime.

Where do you get this impression? Apple has talked a lot about wanting to manufacture elsewhere, particularly India (as a way to grease the wheels of getting a better presence inside of that market) and perhaps manufacturers certain components outside of China, but final assembly of everything they make is almost 100% China. Apple is in a particularly difficult spot if this tariff nonsense comes to their front door.

I'm pretty sure the Brazilian factory has been running since 2011. I don't think it grew as large as Brazilians were initially promised but that seems a typical FoxConn scam they do. Same thing is happening in Wisconsin right now.

While right now the majority are assembled in Shenzen, China, I believe they're able to shift reasonably quickly to other facilities. I couldn't find the percentage of iPhones made in Brazil or even outside of China. Presumably that's closely held. I doubt they could shift all assembly were the tariffs to hit, but I suspect they could shift more than most assume.

Yeah I thought they were heavily dependent on China for a supply chain of hundreds of components.

Yes for *components* but I'm talking assembly or final production. The traditional problem of other manufacturing sites like say Texas is that some components like screws are harder to get particularly if you need them fast. However a move to nearby nations like Viet Nam avoids or at least minimizes a lot of that. India would, I suspect, be much harder to deal with than Viet Nam.

They wouldn't have to assemble everything outside of China – just those products destined for the US. This trade war is bilateral, so every other country in the world is sitting it out.

I think the bigger danger is China (or the US) actively putting pressure on Apple. I find that unlikely for the Chinese because suddenly having hundreds of thousands (or millions) of underemployed assembly line workers wouldn't be in their best interests. As far as the US, I can't really speculate from a position of confidence because things seem so erratic.

But pretty much every large scale piece of consumer electronics is currently manufactured in China, so if things heat up, I can't see how Apple would be at any more of an advantage or disadvantage than anyone else. And many of Apple's Taiwanese suppliers have been moving very quickly to offset capacity to SouthEast Asia, especially Vietnam, Thailand, Malaysia, etc. So the wheels are in motion there regardless, but as mentioned it's a multi-year process.

I'm pretty sure the Brazilian factory has been running since 2011. I don't think it grew as large as Brazilians were initially promised but that seems a typical FoxConn scam they do. Same thing is happening in Wisconsin right now.

I don't know the specifics of their supply chain, but the nature of trade protections in Brazil make it very common for companies to set up final assembly sites there. You do all the hard work somewhere with the infrastructure and talent for it (Brazil is sorely lacking in both), then ship a few final components that can be snapped together to qualify for tax relief.

I'd be surprised if Apple has more than really basic final assembly in place there.

Quote:

Yes for *components* but I'm talking assembly or final production. The traditional problem of other manufacturing sites like say Texas is that some components like screws are harder to get particularly if you need them fast. However a move to nearby nations like Viet Nam avoids or at least minimizes a lot of that. India would, I suspect, be much harder to deal with than Viet Nam.

The US tends to have more sophisticated definitions of what entails country of origin. Of course, this administration isn't exactly up to historic levels of sophistication so what they are actually enacting.

The US tends to have more sophisticated definitions of what entails country of origin. Of course, this administration isn't exactly up to historic levels of sophistication so what they are actually enacting.

Yes, I'm going by the level of sophistication of the current administration who seems more focused on portraying there being a fight than particularly caring about details or results. I mean if they cared about results they'd be avoiding a trade war and if they cared about sophistication they'd stop thinking that the trade deficit is a debt.

Yeah, dealing with an inefficient communist totalitarian capitalist structure isn't easy. The volumes and profits are great at first but then you have to fight your way out of there. But China can't just steal IP and then flood the world with cheap versions if they themselves are not open to fair trade.

curious? it the basis for how Amazon and most other retailers operate.

Yeah, but Apple routinely sells to retailers at around $50 below MSRP. That's why you don't generally see discounts - Apple doesn't afford them the margins to do so. Instead, they get AppleCare at next to nothing, as well as other products (Beats is part of this strategy).

So if retailers are offering discounts, then Apple is offering them discounts. And that's not how Apple normally operates.

curious? it the basis for how Amazon and most other retailers operate.

Yeah, but Apple routinely sells to retailers at around $50 below MSRP. That's why you don't generally see discounts - Apple doesn't afford them the margins to do so. Instead, they get AppleCare at next to nothing, as well as other products (Beats is part of this strategy).

So if retailers are offering discounts, then Apple is offering them discounts. And that's not how Apple normally operates.

iPads and some other stuff have been selling at discounts here and there (regularly enough) for a while now, before they got back to Amazon. Even if you consider it curious, it's not really all that new for them. It feels like a few years now.

curious? it the basis for how Amazon and most other retailers operate.

Yeah, but Apple routinely sells to retailers at around $50 below MSRP. That's why you don't generally see discounts - Apple doesn't afford them the margins to do so. Instead, they get AppleCare at next to nothing, as well as other products (Beats is part of this strategy).

So if retailers are offering discounts, then Apple is offering them discounts. And that's not how Apple normally operates.

iPads and some other stuff have been selling at discounts here and there (regularly enough) for a while now, before they got back to Amazon. Even if you consider it curious, it's not really all that new for them. It feels like a few years now.

curious? it the basis for how Amazon and most other retailers operate.

Yeah, but Apple routinely sells to retailers at around $50 below MSRP. That's why you don't generally see discounts - Apple doesn't afford them the margins to do so. Instead, they get AppleCare at next to nothing, as well as other products (Beats is part of this strategy).

So if retailers are offering discounts, then Apple is offering them discounts. And that's not how Apple normally operates.

The market is different than it was a few years ago, and Apple isn’t shy about trading profits for market share on the phones, tablets and watches. It used to be just through their partners but they did a really aggressive trade-in program when it became apparent phone sales weren’t going to be there.

They’re pushing the iPad pretty heavily but I think that’s two things, first is the touchscreen windows devices have gotten more popular so there’s more competition, and they want to build critical mass for ipadOS which will have a halo effect on Mac sales. The latter is due to Catalyst energizing the Mac ecosystem and because Sidecar apparently only works on newer intel chips (like 2016+ Macs) so some people reticent go buy a butterfly keyboard Mac might decide to finally bite the bullet.

curious? it the basis for how Amazon and most other retailers operate.

Yeah, but Apple routinely sells to retailers at around $50 below MSRP. That's why you don't generally see discounts - Apple doesn't afford them the margins to do so. Instead, they get AppleCare at next to nothing, as well as other products (Beats is part of this strategy).

So if retailers are offering discounts, then Apple is offering them discounts. And that's not how Apple normally operates.

The market is different than it was a few years ago, and Apple isn’t shy about trading profits for market share on the phones, tablets and watches. It used to be just through their partners but they did a really aggressive trade-in program when it became apparent phone sales weren’t going to be there.

They’re pushing the iPad pretty heavily but I think that’s two things, first is the touchscreen windows devices have gotten more popular so there’s more competition, and they want to build critical mass for ipadOS which will have a halo effect on Mac sales. The latter is due to Catalyst energizing the Mac ecosystem and because Sidecar apparently only works on newer intel chips (like 2016+ Macs) so some people reticent go buy a butterfly keyboard Mac might decide to finally bite the bullet.

And what’s interesting is that even with these frequent discounts the margin is still within a percentage point of historical norms. So either they’re building more margin into devices from the get-go to compensate for these sales or the retailers are eating the margin loss to sell them as a loss leader bringing in high value customers. I wouldn’t be surprised if it was a little of column a and a little of column b.

Yeah, but Apple routinely sells to retailers at around $50 below MSRP. That's why you don't generally see discounts - Apple doesn't afford them the margins to do so. Instead, they get AppleCare at next to nothing, as well as other products (Beats is part of this strategy).

So if retailers are offering discounts, then Apple is offering them discounts. And that's not how Apple normally operates.

In the US, Apple retailers have been offering discounts for nearly the last decade. This may be news to those outside of the country, but a sale on Apple products at a Apple retailer is a regular thing in the US.

Yeah, but Apple routinely sells to retailers at around $50 below MSRP. That's why you don't generally see discounts - Apple doesn't afford them the margins to do so. Instead, they get AppleCare at next to nothing, as well as other products (Beats is part of this strategy).

So if retailers are offering discounts, then Apple is offering them discounts. And that's not how Apple normally operates.

In the US, Apple retailers have been offering discounts for nearly the last decade. This may be news to those outside of the country, but a sale on Apple products at a Apple retailer is a regular thing in the US.

Depends on the retailer and the volumes they can sell at.

This article gives some insight. Basically, the more devices you move, more likely you are to get a discount per device basis from Apple. Retailers hope to make back some margin from accessory sales, and AppleCare, which is basically given away by Apple for free.

curious? it the basis for how Amazon and most other retailers operate.

Yeah, but Apple routinely sells to retailers at around $50 below MSRP. That's why you don't generally see discounts - Apple doesn't afford them the margins to do so. Instead, they get AppleCare at next to nothing, as well as other products (Beats is part of this strategy).

So if retailers are offering discounts, then Apple is offering them discounts. And that's not how Apple normally operates.

The market is different than it was a few years ago, and Apple isn’t shy about trading profits for market share on the phones, tablets and watches. It used to be just through their partners but they did a really aggressive trade-in program when it became apparent phone sales weren’t going to be there.

They’re pushing the iPad pretty heavily but I think that’s two things, first is the touchscreen windows devices have gotten more popular so there’s more competition, and they want to build critical mass for ipadOS which will have a halo effect on Mac sales. The latter is due to Catalyst energizing the Mac ecosystem and because Sidecar apparently only works on newer intel chips (like 2016+ Macs) so some people reticent go buy a butterfly keyboard Mac might decide to finally bite the bullet.

And what’s interesting is that even with these frequent discounts the margin is still within a percentage point of historical norms. So either they’re building more margin into devices from the get-go to compensate for these sales or the retailers are eating the margin loss to sell them as a loss leader bringing in high value customers. I wouldn’t be surprised if it was a little of column a and a little of column b.

I suspect it’s almost entirely Apple building in more margin. Apple never needed to discount before but the price of an iPhone also used to be considerably lower. If a new iPad lists at $999 and then periodically consumers see it at $799 they’ll think “omg what a deal!” and buy whereas if it was always at $799 they’d lose the higher margin sales and customers would make more rational decisions based on need rather than perceived value. With phones the carriers are willing to take a loss up front because they make so much on monthly fees, there you see offers like b1g1 or much higher discounts (in the form of monthly bill credits natch.

curious? it the basis for how Amazon and most other retailers operate.

Yeah, but Apple routinely sells to retailers at around $50 below MSRP. That's why you don't generally see discounts - Apple doesn't afford them the margins to do so. Instead, they get AppleCare at next to nothing, as well as other products (Beats is part of this strategy).

So if retailers are offering discounts, then Apple is offering them discounts. And that's not how Apple normally operates.

iPads and some other stuff have been selling at discounts here and there (regularly enough) for a while now, before they got back to Amazon. Even if you consider it curious, it's not really all that new for them. It feels like a few years now.

It’s definitely normal, especially for that model at that price point. Like it happens regularly enough that there’s no reason to buy that iPad at the normal price if you can wait a bit. Walmart has that one and a bunch of others on sale right now too in fact. In the past pretty sure I’ve seen it from other big retail stores like Target, Best Buy, I think B&H and some of the other online tech retailers too.

Apple Watch goes through similar semi regular sales too, usually for the previous gen ones Apple keeps around. Looks like the usual $199/229 (38/42mm) price is around right now at Walmart, Amazon has a few particular colors on sale, etc.

BTW - did you notice Apple is now selling direct on Amazon? Not their top end machines - at least I couldn't spec an iMac or MacMini for an i7 or i9 - just the i3 and i5 variants. But still that's new and probably significant.

It’s definitely normal, especially for that model at that price point.

Apple's sales channel on Amazon is directly competing against its sales channel on its own web-store.

That's not normal. And it's especially curious for a company that has exercised tight control over pricing for decades.

And yet they’ve done that for at least a few years now at most other Apple authorized major retailers in store and online. Considering it’s usually the same deal on the same products at a semi regular clip, and there’s been no indication they’ve gotten any looser about dealing with retail partners, I’d guess it’s something like this: